NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
An investor's portfolio of Rs 2,00,000 earns 12% in year one and loses 10% in year two. What is the portfolio value at the end of year two?
The portfolio is worth Rs 2,01,600. After a 12% gain it becomes Rs 2,24,000, and a 10% fall on that larger base removes Rs 22,400. Simply netting the percentages to a 2% gain would overstate the value, because returns compound multiplicatively.
- ARs 2,00,000
- BRs 2,04,000
- CRs 2,01,600Correct
- DRs 2,06,400
Explanation
Year one: 2,00,000 x 1.12 = 2,24,000. Year two: 2,24,000 x 0.90 = 2,01,600. Adding the returns (12% - 10% = 2%) would wrongly give Rs 2,04,000. The geometric chaining shows the loss applies to a larger base.
Did you get it right without looking?
One question tells you little. A timed set on Investment Landscape shows your real accuracy, how long you take and where you lose marks.
More Investment Landscape questions
- An investor's portfolio value rises from Rs 2,00,000 to Rs 2,40,000 in exactly 2 years, with no additions or withdrawals. What is the approx…
- Which of the following best describes 'inflation risk' faced by an investor who keeps all savings in a bank savings account?
- Ms. Kavita invested Rs 2,00,000 in a fixed deposit at 10% per annum compounded annually. What will be the maturity value at the end of 2 yea…
- Which of the following best describes 'inflation risk' faced by an investor holding a fixed deposit that pays a fixed rate of interest?
- Mr. Iyer bought a bond for Rs 1,000 and received Rs 80 as interest during the year. At year end, he sold the bond for Rs 1,020. What is his …
- An investor's portfolio earned a nominal return of 10% in a year when inflation was 6%. Using the exact (Fisher) relationship, the real retu…